Antipiracy Case Sends Shivers Through Some Legitimate Storage Sites

SAN FRANCISCO — If Megaupload is guilty, then who among its brethren is innocent?

On Thursday, federal authorities shut the Web site of Megaupload, a file-sharing service, and accused its operators of copyright infringement and running a vast “Mega Conspiracy.” They could face 20 years in prison.

But Megaupload was not the only such service on the Web. Many companies have crowded into the online storage market recently, most of them aimed at consumers and businesses that want convenient ways to get big data files out of their teeming in-boxes, off their devices and into the cloud — perhaps so that friends or co-workers can download them. They include MediaFire, RapidShare, YouSendIt, Dropbox and Box.net. And there are similar services from Amazon, Google and Microsoft.

All of these market themselves as legitimate ways to store content online. But they are inherently ideal for anyone looking to illegitimately upload and share copyrighted video and audio files. Most companies rarely, if ever, inspect individual files to see if the material they store on behalf of users violates copyrights, unless they are notified by someone claiming infringement.

The Megaupload indictment reminds companies that how they manage copyrighted material on their sites could determine whether they continue to operate freely or face legal consequences. At the same time, it offers a look at just how widespread such piracy is and how tricky it can be to cut down on it, given the many ways people can send files to each other online.

“The goal of the Megaupload indictment is to push and prod other companies to take copyright infringement more seriously,” said Orin S. Kerr, a law professor at George Washington University.

Federal prosecutors seem to have thrown the book at Megaupload. The indictment asserts that the company’s business model depended on people violating copyright and that it gave them incentives to do so, while charging subscription fees for watching video and placing ads in front of material it did not own.

When asked to remove copyrighted works, the indictment says, Megaupload at best removed a particular version but left copies elsewhere in its system.

Federal prosecutors assert that although the site claimed to be protected under the Digital Millennium Copyright Act, or D.M.C.A., the business was in fact a sham that made $175 million off $500 million in copyrighted goods. Web sites that operate in the United States are typically offered “safe harbor” for copyright violations under the D.M.C.A., as long as they do not profit from the illegitimate material and immediately take it down once contacted.

But the act treats violations “very much as a ‘you know it when you see it’ rule,” said Aaron Levie, chief executive of Box.net, a popular online storage company. “You look at how they make money, and you look at how they treat D.M.C.A. requests to take down material.”

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Box.net is one of the many companies that have entered the online storage market recently.

Megaupload waved the D.M.C.A. flag even though it was based in Hong Kong and many of its executives were in New Zealand. It was a juicy federal target for its sheer size. The site accounted for roughly 1 percent of total Internet traffic in North America, nearly 2 percent of traffic in the Asia-Pacific region and more than 11 percent in Brazil, according to Sandvine, a Canadian company that provides equipment to monitor Internet traffic. The indictment contends that Megaupload has over 180 million registered users and, at one point, was the 30th-most-visited site on the Web.

Ira P. Rothken, a lawyer for Megaupload, said on Thursday, “Megaupload believes the government is wrong on the facts, wrong on the law.”

Mr. Levie of Box.net noted that his company and Dropbox, as well as the services from Google and Microsoft, were less likely prosecution targets because they depended to a large extent on legitimate corporate purchases of their storage. These services are more focused on sharing within organizations and small groups. While this can make it more difficult for an outsider or the authorities to see who is storing what, it makes it less likely that huge copyright violations are taking place.

Lori Shen, a spokesman for YouSendIt, said any comparison between that site and Megaupload would be inaccurate.

“YouSendIt is a private and secure business collaboration tool for business users. It provides a secure vehicle to share, send, sign and sync business content online,” Ms. Shen said.

Megaupload had its fans in the workplace, too. A study published Thursday by the security firm Palo Alto Networks indicated that the use of Megaupload on corporate networks was greater than the combined use of Box.net, Dropbox and YouSendIt, as measured by the amount of data transferred. Of course, it is not clear how much of that data was work-related and how much was for the purpose of in-cubicle entertainment.

After the indictment, a number of Megaupload users took to Twitter to complain that they had used it to back up personal files, to share files with clients and as a collaboration tool.

When asked about the Megaupload case, RapidShare, Minus and several other consumer-oriented storage sites offered statements saying that they respected copyright and complied with requests to take down material.

The Megaupload indictment came amid a battle in Washington over antipiracy legislation. Some of the recent concern among those in the tech industry about the Stop Online Piracy Act, or SOPA, was that it would permit the rapid shutdown of any site that had even a small amount of unauthorized copyrighted material on it, a big risk for sites that accept uploads from users. Backers of the legislation, which has been shelved for now, say it was aimed only at foreign sites that were primarily about piracy.

As online storage businesses go, Mr. Levie said, Megaupload was more lucrative than most. “I looked at the list of cars Kim Dotcom owned and wondered if I was in the wrong business,” he said, a reference to the company’s founder.

He added: “Then again, I’m not in jail.”

A version of this article appears in print on January 21, 2012, on page B1 of the New York edition with the headline: A Crackdown's Long Shadow: Antipiracy Case Sends Shivers Through Some Legitimate Storage Sites. Order Reprints|Today's Paper|Subscribe